Non-Core Operations Unit (NCOU)

Transcription

1 Re-segmentation and Non-Core Operations Unit (NCOU) Analyst call Frankfurt,

2 Key messages New segmental structure reflects progress on key elements of Strategy NCOU established in 4Q2012 Single, integrated AWM division Refinement in allocation of coverage expenses between CB&S and GTB NCOU fully operational Governance structure and relationship with the core businesses defined; financial reporting set up EUR 122 bn assets (per 30 Sep 2012) are in NCOU; pro-forma Basel 3 RWA equivalent of EUR 125 bn Risk profile well-understood and managed Published targets of capital roadmap by 31 March 2013 reaffirmed: Reduction in non-core assets to approx. EUR 90 bn pro-forma Basel 3 RWA equivalent 8% pro-forma Basel 3 Core Tier 1 ratio fully loaded 2

3 Agenda 1 re-segmentation 2 Establishment of NCOU 3 NCOU risk profile 3

4 New Overview of changes in segment composition CB&S GTB AWM PBC C&A CI Operating Businesses 1 CB&S GTB AWM PBC C&A Non-Core Operations Unit Reassignment of management responsibilities for non-core operations 2 3 Changes to the allocation of coverage costs to reflect new organizational responsibilities (1) Reassignment of management responsibilities for asset-gathering business New segmentation will take effect in 4Q2012 reporting (1) Adjustment to coverage cost allocation following further integration of these activities under Project Integra 4

5 Detailed re-segmentation effects Corporate Banking & Securities FY2011 9M2012 (in EUR m, unless stated otherwise) Old Structure Establishment New Old Structure Establishment New (as reported) of NCOU Other structure (1) (as reported) of NCOU Other structure (1) Total net revenues 14,885 (53) (723) 14,109 13,051 (117) (715) 12,218 Provision for credit losses (304) 214 (0) (90) (474) (63) Total noninterest expenses (11,649) (10,341) (9,820) (8,661) Noncontrolling interests (27) 5 0 (21) (20) 4 (0) (15) Income (loss) before income taxes 2, (220) 3,657 2, (166) 3,479 Risk-weighted assets (at period end) (2), (3) (71.1) (2.3) (63.4) (1.8) Average active equity (3) 22.7 (7.9) (0.4) (7.6) (0.4) 18.8 Financials affected by re-segmentation of EUR 69 bn (as of June 2012) of assets into NCOU Non-interest expenses transferred to the NCOU are signifcantly impacted by litigation charges (settlements /provisions) In addition, financials affected by Re-assignment of management responsibilities for asset-gathering th businesses to AWM Re-allocation of coverage costs (1) Preliminary as of (2) As reported under Basel 2.5 (3) In EUR bn 5

6 Detailed re-segmentation effects Global Transaction Banking FY2011 9M2012 (in EUR m, unless stated otherwise) Old Structure Establishment New Old Structure Establishment New (as reported) of NCOU Other structure (1) (as reported) of NCOU Other structure (1) Total net revenues 3, ,608 2, ,940 Provision for credit losses (158) - - (158) (115) - - (115) Total noninterest expenses (2,328) - (83) (2,411) (1,835) - (61) (1,896) Noncontrolling interests Income (loss) before income taxes 1,122 - (83) 1, (61) 929 Risk-weighted assets (at period end) (2), (3) Average active equity (3) Financials affected by refinement of the allocation of coverage costs to reflect new organizational responsibilities (i.e. EUR ~(80) m from CB&S for FY2011) (1) Preliminary as of (2) As reported under Basel 2.5 (3) In EUR bn 6

7 Detailed re-segmentation effects Asset & Wealth Management FY2011 9M2012 (in EUR m, unless stated otherwise) Old Structure Establishment New Old Structure Establishment New (as reported) of NCOU Other structure (1) (as reported) of NCOU Other structure (1) Total net revenues 3,762 (208) 723 4,277 2,745 (95) 715 3,366 Provision for credit losses (55) 33 0 (22) (28) 13 (0) (15) Total noninterest expenses (2,941) 48 (419) (3,313) (2,478) 36 (489) (2,931) Noncontrolling interests 1 (1) (0) (0) 3 (2) 0 0 Income (loss) before income taxes 767 (128) (47) Risk-weighted assets (at period end) (2), (3) 16.3 (4.0) (3.3) Average active equity (3) 5.7 (0.4) (0.3) Financials affected by re-assignment of management responsibilities for certain asset-gathering businesses to AWM Additional financial impact due to the re-segmentation of EUR 2 bn (as of June 2012) of assets into NCOU (1) Preliminary as of (2) As reported under Basel 2.5 (3) In EUR bn 7

8 Detailed re-segmentation effects Private & Business Clients FY2011 9M2012 (in EUR m, unless stated otherwise) Old Structure Establishment New Old Structure Establishment New (as reported) of NCOU Other structure (1) (as reported) of NCOU Other structure (1) Total net revenues 10,617 (224) - 10,393 7,480 (342) - 7,138 Provision for credit losses (1,309) (1,185) (665) (564) Total noninterest expenses (7,336) (7,128) (5,469) (5,322) Noncontrolling interests (190) 12 - (178) (42) 27 - (15) Income (loss) before income taxes 1, ,902 1,303 (67) - 1,236 Risk-weighted assets (at period end) (2), (3) 95.5 (16.8) (16.4) Average active equity (3) 13.7 (1.6) (1.5) Financials affected by re-segmentation of EUR 44 bn (as of June 2012) of assets and EUR 56 bn liabilities into NCOU P&L mainly driven by revenue impacts related to sales/impairments of the GIIPS bonds (4) portfolio (especially Greek bonds in 2011) and the Structured Credit Portfolio (SCP) (1) Preliminary as of (2) As reported under Basel 2.5 (3) In EUR bn (4) Greece, Italy, Ireland, Portugal, Spain 8

9 Detailed re-segmentation effects NCOU FY2011 9M2012 (in EUR m, unless stated otherwise) CI From CB&S, CI From CB&S, (as reported) AWM and PBC NCOU (1) (as reported) AWM and PBC NCOU (1) Total net revenues ,061 Provision for credit losses (14) (371) (385) (4) (525) (529) Total noninterest expenses (1,492) (1,062) (2,554) (983) (793) (1,776) Noncontrolling interests 2 (16) (14) 7 (29) (22) Income (loss) before income taxes (1,111) (963) (2,074) (473) (793) (1,266) Risk-weighted assets (at period end) (2), (3) Average active equity (3) Corporate Investments in its entirety is now part of NCOU Total non-interest expenses comprise significant special charges, such as litigation related settlements and provisions, as well as specific CI impairments (e.g. Cosmopolitan) Adjusted for these significant items, we expect the NCOU to have a cost run-rate of approximately EUR 0.5 bn per quarter (of which EUR 0.3 bn was the historical run-rate of CI) (1) Preliminary as of (2) As reported under Basel 2.5 (3) In EUR bn 9

10 Agenda 1 re-segmentation 2 Establishment of NCOU 3 NCOU risk profile 10

11 Non-Core Operations Unit Rationale and governance Rationale Improve external transparency on non-core positions Increase management focus on underlying operating businesses Accelerate de-risking Organization New business segment of Group One-time, irreversible assignment of assets to the business segment ring-fenced but with no change in legal entity ownership Management team defined and in place Aligned incentives and de-risking objectives Governance Mandate Manage assets to achieve deleveraging to free up capital Protect shareholder value Success measured on achieving de-risking and capital relief Specific KPIs developed to track progress 11

12 Organizational setup Governance structure Management Board Member Overview Global Head of NCOU directly accountable to Management Board NCOU NCOU Global Head NCOU COO CRO of NCOU CFO NCOU Executive Committee (ExCo) Head of Wholesale Assets Head of Operating Assets Head of NCOU Legal NCOU ExCo responsible for coordinating resources / Group functions Chaired by Global Head of NCOU Dedicated, senior control heads in NCOU ExCo with reporting lines to respective Board members Sending business functions not part of NCOU ExCo Business functions Control functions 12

13 Selection criteria for non-core positions 1 Non-core operations for going forward (i.e. no client business relevance) 2 Assets materially affected by business environment or regulatory changes 3 Earmarked for de-risking Assets in run-off mode Exit already identified as preferred route 4 Significant capital absorption with low returns 5 Liabilities of businesses in run-off or dedicated to assets selected for NCOU 6 Suitable for separation Better management possible outside of existing business unit Limited operational issues making separation from current organization relatively seamless 13

14 NCOU portfolio overview Key positions (non-exhaustive) Key financials (as of 30 June 2012) AW WM CI AWM non-core Sal. Oppenheim (SOP) assets in run-off SOP workout credit portfolios Exit of participations Entire CI portfolio, e.g. Cosmopolitan, Maher, BHF-Bank In EUR bn AWM CI PBC CB&S % % 19 3% 9% 13% PBC Postbank (PB) Structured Credit Portfolio (SCP), GIIPS bonds SCP and GIIPS bonds in run-off mode since 2008/09 PB Repo with balance sheet leverage Non-strategic balance sheet leverage driven Repo matched book Non-core loan portfolios Selected loan portfolios, no longer core products or markets for PBC s proposition 44 32% 69 50% % CB&S CB&S legacy portfolio Correlation and capital intensive securitization positions Monoline positions All IAS 39 reclassified assets Assets Pro-forma Basel 3 RWA equivalent (1) (1) RWA plus equivalent of items currently deducted 50/50 from Tier 1/Tier 2 capital whereby the Tier 1 deduction amount is scaled at 10% 14

15 NCOU portfolio evolution since June 2012 and outlook Pro-forma Basel 3 RWA equivalent (1) In EUR bn Sending business divisions: AWM CI PBC CB&S ~90 ~5 ~2 ~ ~70 30 June September March 2013 (target) Note: Numbers may not add up due to rounding (1) RWA plus equivalent of items currently deducted 50/50 from Tier 1/Tier 2 capital whereby the Tier 1 deduction amount is scaled at 10% 15

16 Agenda 1 re-segmentation 2 Establishment of NCOU 3 NCOU risk profile 16

17 Overview of the NCOU portfolio Total adjusted assets (1) (Total: EUR 122 bn) In EUR bn, as of 30 Sep 2012 PBC: Other CI AWM IAS 39 reclassified assets 2 Other loans Monolines (3) 2.4 Credit 4 trading PBC: Postbank correlation non-core book 6.6 Other trading Other 5 positions Pro-forma Basel 3 RWA equivalent (2) (Total: EUR 125 bn) In EUR bn, as of 30 Sep CI PBC: Other PBC: Postbank non-core Other NCOU portfolio primarily comprises already disclosed assets it is not a bad bank Diversified assets partially with high capital requirements but low RoA/RoE Expected LLPs p.a. amount to ~1% of loans (5) (total loans: EUR 54 bn) CB&S PBC CI AWM 11.9 AWM IAS 39 reclassified assets Other trading positions (4) (1) Total assets according to IFRS adjusted for netting of derivatives and certain other components (2) RWA plus equivalent of items currently deducted 50/50 from Tier 1/Tier 2 capital whereby the Tier 1 deduction amount is scaled at 10%. Breakdown excludes EUR 22.6 bn related to operational risk RWA (3) Includes bonds wrapped by monolines (4) Includes EUR 7.6 bn capital deduction items from securitization assets (5) Includes potential LLPs from accelerated de-risking based on current plan Other loans Monolines Credit trading correlation book DB Blue template

18 1 IAS 39 reclassified assets (1) Portfolio significantly reduced, higher risk assets manageable Assets by risk category (CV & valuation gap) Carrying value, in EUR bn Mar 2009 (51)% Jun Sep 2012 CV/FV gap (vs. peak of EUR 6.7 bn in Mar 2009 and EUR 2.4 bn in Jun 2012) Sep Lower risk Medium Higher 2012 (2) risk risk IG rating (3) ibb range (3) Below ib+ & NR (3) Higher risk portfolio by asset type Carrying value, in EUR bn In % Leverage Finance Commercial real estate EU Other ABS (mainly CDOs) European mortgages US US RMBS / Other US municipalities Total higher risk portfolio IAS 39 portfolio decreasing and >50% IG rated; higher risk sub-portfolio (EUR 3.6 bn, down 33% qoq) either diversified or adequately reserved Since reclassification, EUR 7.0 bn CV sold at a net cost of EUR 472 m (4) representing only 7% of initial CV Limited concentration with potential for LLP increases of EUR ~325 m (5) over the remaining lifetime across all portfolios, only representing ~17% of CV/FV gap Note: CV = Carrying value net of loan loss allowance (LLA), FV = Fair value. Figures may not add up due to rounding. (1) Assets originally reclassified in 2008/2009; 100% loans (2) Net of LLPs (3) Internal ratings (4) CV sold figure is CV at reclassification date (EUR 6.2 bn CV at disposal date) (5) Does not include potential LLPs from accelerated de-risking; forecasted incremental loss down from EUR ~500 m in 2Q mainly driven by asset disposals 18

19 2 Other loans (non IAS 39 reclassified) Portfolio well diversified, higher risk assets manageable Assets by risk category Portfolio by assets Net loans, in EUR bn, as of 30 Sep % 4% % 15% 21% 8% % 53% 30 Sep 2012 (1) Lower risk Medium risk Higher risk IG rating (2) ibb range (2) ib & below (2) CRE Collateralized structured loans Asset finance Mortgages Overall satisfactory portfolio quality with 64% IG rated. Portfolio diversified across ~5,000 names with larger exposures geared towards better rated clients. 44% with roll-off profile within 24 months (3) Higher risk bucket includes two large collateralized li CRE exposures, adequately reserved, limiting iti further downside; additional EUR 525 m of highly diversified UK residential mortgages Remaining higher risk assets well diversified across ~3,000 names, with ~50% maturing <1 year and an additional ~15% maturing <2 years (3) ; supported by adequate LTVs Note: Numbers may not add up due to rounding (1) Net of LLPs (2) Internal ratings (3) Based on contractual maturity dates Other 19

20 3 Monolines Portfolio significantly reduced, exposure dynamically reserved Portfolio development Exposure reserves Exposure, in EUR bn (1) CVA Fair value after CVA In EUR bn, as of 30 Sep (58%) 22% CVA 33% CVA 2.5 CVA Fair value after CVA TruPs Other (2) 15% 17% Student loan 53% CLO 1% CMBS 14% 31 Dec 31 Dec 30 Jun 30 Sep IG Non-IG Exposure reduction benefited from improved asset valuations, portfolio run-off and voluntary commutations 73% of existing net exposure is to highest rated monoline (AA-/Aa3); remainder on lower risk pool of underlying assets (no sub-prime/alt-a RMBS) Portfolio dynamically reserved; additional EUR 0.7 bn incremental CVA estimated in a stress case scenario (~45% monoline spread widening, ~55% reduction in underlyings & ~15% USD strengthening vs. EUR) Note: Figures may not add up due to rounding. (1) Excludes indirect counterparty exposure to monoline insurers relating to wrapped bonds (2) Other includes Project Finance, Military Housing, Aircraft, Public Sector, Corp CDO 20

21 4 Credit trading Correlation book Significantly reduced since 2009 Portfolio development Risk development Outstanding notional, in EUR bn Development of key risk metrics, in EUR m (70)% ,000 (45)% 50 (25)% % Dec 2009 Unwound Matured 30 Sep Dec 2009 Jun 2010 Dec 2010 Jun 2011 Dec 2011 Sep 2012 VaR (lhs) EC Economic capital (rhs) Significant focus on credit correlation for de-risking and unwinds post 2009 As a result 70% reduction in notional size with market risk metrics down ~90% (VaR) and ~70% (EC) Portfolio substantially ti rolls off within 3 years 21

22 5 Other trading positions Assets by risk category Fair value, in EUR bn, as of 30 Sep 2012 Higher risk portfolio by asset type % 28% 14% Other 22% Bonds 21% 57% Traded loans Total Low Risk Medium Risk Higher Risk IG rating (1) ibb range (1) ib & below (1) Overall satisfactory portfolio quality with 58% IG rated. Portfolio diversified across ~14,000 names Top higher risk assets comprise two collateralized CRE assets (fair valued) and one hedged EM sovereign bond Remainder well diversified across ~3,500 names, with no other major concentrations (1) Internal ratings DB Blue template

23 6 PBC non-core portfolio De-risking via targeted capital intensive assets sale & near term roll-offs offs Non-core asset breakdown (EUR 39 bn) Non-core RWA equivalent breakdown (EUR 18 bn) As of 30 Sep 2012 As of 30 Sep 2012, under pro-forma Basel 3 Structured Credit Structured Credit Products (SCP) Postbank Selected foreign Products (SCP) Postbank 2% Selected foreign residential mortgages Repo 12% residential mortgages 20% Postbank 0% 21% Repo Postbank 30% Other financial 15% Selected CRE investments (1) 26% Postbank 23% Selected CRE 13% Postbank Other financial 13% 7% 12% investments GIIPS bonds 6% (1) Others Postbank (2) Others GIIPS bonds Postbank (2) Targeted de-risking of higher capital intensive Structured Credit Products, Investment portfolios and selected CRE assets (EUR 11.7 bn or 30% of total assets consume EUR 11.0 bn or 61% of total RWA equivalent) Regular roll-off of less capital intensive selected foreign loan portfolios, remaining GIIPS bonds and low risk, short-term repo (EUR 25.0 bn or 63% of assets consume EUR 4.9 bn or 27% of RWA equivalent) (1) Includes dedicated investment portfolios (high yield, corporate bonds, non-german municipal bonds) (2) Exposures to financial institutions, corporates and covered bonds 23

24 6 Deep-dive on selected Postbank non-core portfolios De-risking improves credit quality, further downside protection from PPA Structured Credit Portfolio (1) In EUR bn 3.9 (67)% Dec 2010 Sep 2012 Carrying value Delta-to-notional Selected Commercial Real Estate In EUR bn Dec 2010 Sep 2012 GIIPS bonds In EUR bn Investment loans Development loans 60% 50% 7% 16% 33% 34% Dec 2010 Sep % 28% 59% 72% Dec 2010 Sep 2012 Non-IG BBB range AAA-A range Non-IG IG Comments Structured Credit Portfolio: Material de-risking achieved while improving asset quality Selected Commercial Real Estate: Diversified portfolio with no single large concentration; adequately LLP provisioned (>25% covered) GIIPS bonds: Significant reduction achieved, ~60% covered bonds with the remainder of strong issuer credit quality (>98% IG) Book Value (3) Fin. instit. (68)% 2.6 Covered 15.9 Sovereign Dec 2010 Sep 2012 Spain Italy Ireland Portugal (1) Excludes Postbank originated securitizations (2) LLP coverage ratio (LLPs over impaired loans) excluding additional PPA protection per Sep 2012 (3) Portfolio view including hedges and accrued interests 24

25 7 Corporate Investments Largest operating assets in CI portfolio Opened in 2010 One of the leading luxury resort casinos on the Las Vegas Strip German private bank since 1854 Assets: EUR 19.8 bn (1) RWA equivalent (B3): EUR 13.3 bn (1) Largest container terminal in the Port of New York and one of the fastestgrowing North American terminals at Prince Rupert, B.C., Canada One of the world's leading players in Focus on de-risking CI characterized by large operating assets: as of 30 September 2012, over three quarters of frwa (2) concentrated in Cosmopolitan, Maher, BHF and Actavis Focus on de-risking confirmed: Sale of Actavis to Watson closed on 31 October 2012, reducing proforma Basel 3 RWA equivalent by approx. EUR 4 bn Contract to sell BHF to Kleinwort Benson Group signed on 20 September 2012 generic pharmaceuticals For Cosmopolitan and Maher, continuing to improve the underlying operating performance is key for successful de-risking Recently sold to Watson Pharmaceuticals (1) As of 30 September 2012 (2) Based on pro-forma Basel 3 RWA equivalent as of 30 September

26 Liability transfer and funding Overview Rationale for transfer & observations Composition of transferred liabilities Liabilities of business in run-off or for sale Total: EUR 77 bn, as of 30 September 2012 Legacy Postbank/BHW bond formats not to be issued in future (unsecured, covered issuance backed by registers A, B, C, E) Other Various other short-dated liabilities linked to customers transferred assets (e.g. repos, CP) 8% Financing Capital vehicles No impact from transfer on credit quality of Discretionary wholesale 12% markets investment 2% 29% Transferred liabilities will partially fund NCOU assets, residual from funding pool NCOU run-down expected to have a positive impact on DB Group s funding profile Capital markets portfolio Primarily composed of Postbank Group (1) issuance with weighted average tenor of 7 years; EUR 8.4 bn to mature in the next 5 years Liability management may be considered in future to accelerate maturities in line with asset de-risking Secured funding & shorts 17% Retail deposits 32% (1) Postbank and BHW 26

27 Additional information

28 Further information on allegations about the Bank s bespoke trading book Some media reported allegations of a former employee concerning the valuation of the Bank s bespoke trading book during the credit crisis Focused primarily on valuation of leveraged super senior trades and the possibility that collateral posted for those trades may not cover all potential losses None of the sources for these allegations had any responsibility for, or direct knowledge of, valuation of this trading book or other key facts The Bank promptly disclosed the substance of these allegations to the SEC first and before any employee did so, including before the current whistleblower was even employed by the Bank and approximately ten months before he first raised some of the same allegations already disclosed The Bank undertook a comprehensive two-year long internal review conducted by outside counsel that concluded: Prior to any allegations being made, each of the issues raised by the former employees had been the subject of extensive discussion among the relevant business and control groups Bank personnel evaluated all available information and tools and employed their best judgment for the fair value of this trading book during unprecedented market conditions The risks of this book were regularly disclosed to the management and supervisory boards and the Bank s outside auditor External auditors were aware of, and comfortable with, the Bank s treatment of these issues The Bank remains confident that these unsubstantiated allegations of wrongdoing, which date back to March 2010, are wholly unfounded and that its valuation of the bespoke book throughout the credit crisis was reasonable and well-supported 28

29 Refinement of the size of the Non Core Operations Unit since September 2012 Investor Day AWM CI PBC CB&S Assets Pro-forma Basel 3 RWA equivalent (1) In EUR bn In EUR bn ~125 ~1 ~20 ~35 AWM ~1 Population changes ~0 Refined financials ~1 CI - Population changes - Refined financials - PBC ~9 Population changes ~12 Refined financials ~(3) CB&S ~(1) Population changes ~(1) Refined financials ~(1) ~70 69 ~135 ~3 ~13 ~20 AWM ~1 Population changes ~0 Refined financials ~0 CI - Population changes - Refined financials - PBC ~(0) Population changes ~1 Refined financials i ~(1) ~100 CB&S ~6 106 Population changes ~0 Refined financials ~6 30 June 2012 (Investor Day Sep) 30 June 2012 (final) 30 June 2012 (Investor Day Sep) 30 June 2012 (final) Note: Numbers may not add up due to rounding (1) RWA plus equivalent of items currently deducted 50/50 from Tier 1/Tier 2 capital whereby the Tier 1 deduction amount is scaled at 10% 29

30 Cautionary statements This presentation contains forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about our beliefs and expectations and the assumptions underlying them. These statements are based on plans, estimates and projections as they are currently available to the management of Deutsche Bank. Forward-looking statements therefore speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events. By their very nature, forward-looking statements involve risks and uncertainties. A number of important factors could therefore cause actual results to differ materially from those contained in any forward-looking statement. Such factors include the conditions in the financial markets in Germany, in Europe, in the United States and elsewhere from which we derive a substantial portion of our revenues and in which we hold a substantial portion of our assets, the development of asset prices and market volatility, potential defaults of borrowers or trading counterparties, the implementation of our strategic initiatives, the reliability of our risk management policies, procedures and methods, and other risks referenced in our filings with the U.S. Securities and Exchange Commission. Such factors are described in detail in our SEC Form 20-F of 20 March 2012 under the heading Risk Factors. Copies of this document are readily available upon request or can be downloaded from 30